UK house prices are expected to experience a short-term drop for the first time since 2012, according to the latest Royal Institution of Chartered Surveyors survey.
Central London house prices are already falling, with 35 per cent more polled property professionals reporting that prices had fallen rather than risen over the past month.
While prices are continuing to climb modestly across the rest of the UK, this trend looks set to fade, with 10 per cent more respondents predicting that prices would fall rather than increase over the coming three months.
London and East Anglia are expected to be worst hit, with 43 per cent (net balance) and 33 per cent (net balance) of respondents respectively stating prices will fall over the next quarter.
Rics chief economist Simon Rubinsohn pointed out that unfortunately, for the many young people looking to enter the property market, it is unlikely this will mean the emergence of a more affordable market.
“Instead, it appears to me that what we are looking at is a short term drop caused by the uncertainty resulting from the forthcoming EU referendum, coupled by a slow-down following the rush to get into the market ahead of the tax change on the purchase of investment properties.
“Certainly, that’s the story we are hearing from our members. There is not at this point a sense that a fundamental shift is taking place in the market.”
Buyer demand fell across the UK for the second consecutive month and at the fastest pace since 2008, with a third more Rics members stating demand decreased last month.
The survey also revealed that in the longer term, while house prices are expected to regain momentum, rents look set to outpace them with UK rents predicted to increase by 4.7 per cent year-on-year for the next five years, compared to house price increases of 4.1 per cent.
The number of agreed sales also fell for the second consecutive month, with a net balance of 22 per cent of respondents reporting a fall rather than an increase in activity.
Meanwhile, chartered surveyor e.surv’s latest mortgage monitor confirmed a further slowdown in home lending in May, ahead of the EU referendum, meaning house purchase lending activity has fallen to a 12-month low.
Last month saw 65,113 house purchase approvals (seasonally adjusted), down 1.7 per cent from 66,250 in April.
This is the lowest monthly figure for home purchase loans since the 64,626 granted in May 2015 and follows monthly declines seen in April (minus 5.8 per cent) and March (minus 3 per cent)..
Richard Sexton, director of e.surv, said: “The EU referendum is causing some nervousness within financial circles and bringing new unknowns with it.
“Juggling these challenges will be key to maintaining the current health of the mortgage market and lenders should brace themselves for possible surprises.”